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Mystery: 3.6M Enron Shares Missing

Sep 16, 2002 | USA Today Some call it the Mystery of the Missing Shares.

The question intrigues Enron sleuths. What happened to 3.6 million Enron shares worth $251 million that vanished at the end of a deal involving an LJM partnership run by Andrew Fastow?

''This is a huge amount of stock that disappeared and never reappeared,'' says Robert McCullough of McCullough Research, an energy-consulting firm in Portland, Ore. ''And there has never been an explanation that satisfies anyone.''

The mystery first arose in February, when Enron's board and the Wilmer Cutler & Pickering law firm released their investigative findings on the collapse of Enron.

The board's report found rampant accounting abuses in Fastow's partnerships. One complex 1999 deal involved LJM1, an LJM1 subsidiary called Swap Sub, an entity known as Southampton Place and Rhythms NetConnections, an Internet firm.

After a murky series of transactions over two years involving derivatives contracts and exchanges of millions in Enron shares, LJM1 enjoyed ''a huge windfall'' and Fastow made $4.5 million, the board's report found. Three British bankers in the deal made $7 million, an FBI affidavit shows.

But 3.6 million Enron shares were unaccounted for, the board report found.

''We have not been able to determine what happened to those shares,'' the report reads.

Some shares might have been cashed by LJM1 to pay $64 million owed to Enron in 1999, the board speculates.

But Enron executives and legal and energy experts remain baffled over the fate of the remaining shares. McCullough believes that Fastow and others quietly cashed some of the stock.

Others think the accounting on the partnerships was so sloppy that there never were that many Enron shares in the deal to begin with.

Fastow's attorney and a family spokesman declined to comment.

The Justice Department and the Securities and Exchange Commission also declined to comment.

''It's a very curious episode,'' McCullough says.

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